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Canada set to open one of the world’s biggest diamond mines

The opening of Gahcho Kue in the Northwest Territories will boost Canada’s position as a big player in the industry.

Gahcho Kue, which sits about 280 kilometres northeast of Yellowknife, is expected to produce about 4.5 million carats a year, making it one of the top 10 diamond mines by weight in the world. (De Beers Group of Companies via The Canadian Press)

By Ian BickisThe Canadian Press

Mon., Sept. 19, 2016

CALGARY—Canada’s position as a big player in the global diamond industry will be further crystallized Tuesday when it formally opens Gahcho Kue, estimated to be one of the 10 biggest diamond mines in the world.

The site will be the sixth diamond mine opened in Canada in the 18 years that the country has mined the precious stone. It sits about 280 kilometres northeast of Yellowknife in the Northwest Territories.

“It will be a very significant contributor to the NWT economy,” said Kim Truter, CEO of De Beers Canada, which co-owns the mine with Mountain Province Diamonds.

Truter said the operation will provide $6.7 billion to the Canadian economy over its estimated life span of 12 years and has generated $440 million to the territory’s economy so far.

Gahcho Kue is expected to produce about 4.5 million carats a year, which would make it one of the top 10 diamond mines by weight, according to research compiled by New York-based diamond analyst Paul Zimnisky.

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Stornoway Diamond Corp. is also planning on opening a diamond mine in Quebec — which would be that province’s first — that it wants to bring to commercial production by the end of the year.

Canada’s diamond production is expanding at a time of growing volatility in the industry. Global sales of polished stones declined 2 per cent last year to $24.7 billion (U.S.) as demand fell in emerging markets like India and China.

Lower prices and market instability meant a much bigger drop in the sales of rough diamonds, which dropped about 30 per cent to an estimated $13.7 billion (U.S.).

“Volatility is here to stay as global markets are likely to continue to fluctuate,” De Beers said in its 2016 market report.

The market conditions, combined with operational problems, forced De Beers to close its Snap Lake diamond mine in December last year at a loss of more than 400 jobs.

“It’s really, really important that these mining operations are competitive,” Truter said. “The problem with Snap Lake was it struggled to be competitive from day one.”

With Gahcho Kue only 80 kilometres southeast of Snap Lake, some have been able to find work at the new mine, which De Beers expects will need about 530 workers to operate.

Truter said the company has been working to share the benefits of Gahcho Kue with local First Nations and Métis, with impact benefit agreements signed with six groups in the area.

De Beers is also working to extend the life of its Victor mine in Ontario, but work on a potential expansion can’t move forward until it reaches an agreement with the Attawapiskat First Nation and other communities in the area.

While expansion work has been delayed for months, Truter said progress is being made.

“We’re working very closely with the local communities to get their support, and I think we are making positive progress,” he said.

But some community members feel they’ve been shortchanged and are pushing for a better impact benefit agreement.

Charles Hookimaw, an Attawapiskat member who helped oversee the implementation of the agreement, said local businesses have had some small contracts, but overall the community has seen little benefit.

“We could have had more business opportunities here,” said Hookimaw.

He said he’d like to see some kind of revenue-sharing or part ownership of the mine and more benefits in general to the community.

Truter said the company spends about $70 million a year on local businesses in Attawapiskat and employs more than 100 full-time employees from the community, along with direct payments made as part of the impact benefit agreement. He said he hopes to be able to reach an agreement with the communities soon.

“We would obviously like to extend the life of Victor, because we really do want to keep the benefits flowing both to us as a company, but also to the community and to the government,” said Truter.

A few quick facts about Canada’s diamond industry

The newest mine:

Gahcho Kue is Canada’s sixth diamond mine. It sits about 280 kilometres northeast of Yellowknife in the Northwest Territories. The $1 billion project is expected to produce about 4.5 million carats, or 900 kilograms, of diamonds a year. De Beers owns 51 per cent of the mine, with the rest belonging to Mountain Province Diamonds.

Canada’s first diamond mine:

Diamond exploration in Canada goes back to at least the 1960s, but the first mine didn’t open until 1998 with BHP Billiton’s Ekati mine. Dominion Diamond Corp. bought the operation in 2013. It has produced about 63 million carats, or 12.6 tonnes, of diamonds as of early 2016.

No guarantee of success:

Out of the six diamond mines that have opened, two have had to shut down ahead of schedule. De Beers closed its Snap Lake mine late last year because of operational problems after spending more than $2.2 billion on it. Tahera Diamond Corp was forced to shutter the Jericho mine in 2008 because of budgetary and mining issues. Most diamond mines are in the Far North, which given its remoteness brings extra challenges.

Canada’s biggest:

The Diavik mine is Canada’s biggest, with about six to seven million carats of production a year. Rio Tinto and Dominion opened the mine in 2003 and it has produced more than 100 million carats, or 20 tonnes. The mine also produced the 187.7 carat Diavik Foxfire last year, the biggest diamond yet found in Canada.

Global player:

Last year, Canada was the fifth largest diamond producer in the world by volume and third largest by value out of 21 countries tracked by the Kimberley Process, an organization that monitors the industry.

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